The US dollar rallied against the yen on Friday, as we are taking on the idea of breaking above the crucial 158-yen level.
USD/JPY
The US dollar rallied a bit against the Japanese yen to kick off the trading session on Friday and now finds itself threatening the 158-yen level. This is a pair that I watch very closely every day because if we can get above the 160-yen level, we will have destroyed a massive resistance barrier and then start to talk about breaking resistance that's been in effect since 1990.
Short-term pullbacks I do think offer buying opportunities as the interest rate differential will continue to favor the US dollar.
Central Bank Outlook and Global Uncertainty
And of course, the Bank of Japan is in a situation where we just don't have a realistic path to higher interest rates, at least not anything of significance. With the massive debt load and the demographics of Japan, it just doesn't make any sense to see the Bank of Japan really start to do things to defend the yen other than maybe jawboning.
The Federal Reserve remains very stubborn with its interest rates and the decision to cut or not cut. That being the case despite the fact that the jobs number was fairly mixed to say the least on Friday. That being said, though, the market is likely to also keep into account that there are some distortions there due to the government being partially shut down previously.
And of course, we have to ask questions about whether or not the headlines in the Middle East caused some type of run to the US dollar. Typically, the Japanese yen ends up being the safety currency in this pair, but I find it very interesting that hasn't been the case this time. I’m a buyer of dips in this market and have no interest in shorting it.